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Price Responsive Load Programs: Price Responsive Load Programs: Framing Paper #1Framing Paper #1
Charles GoldmanE. O. Lawrence Berkeley National Laboratory
NEDRI MeetingBoston, MAApril 2, 2002
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Energy Analysis Department
Outline of PresentationOutline of Presentation
• Benefits (and Costs) of PRL Programs
• Summary of Recent Experience with PRL programs
- Innovative PRL programs offered by LSEs
- Potential & Actual Market Response
- ISO experience and program design
• Types of Wholesale Market DR Programs
• Overview of Key Policy Issues
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Energy Analysis Department
Benefits of PRL ProgramsBenefits of PRL Programs
Collateral Savings
Load Load
Price
Q0 Q2 Q1 Q2 Q1
Supply
Participants DemandP
P2
PL
P1 P1
P2
Price
1
32
4
1
234
Demand (Q1) at Retail rate (P1)Retail demand supplied at higher wholesale price (P2)
Reduction in participants demand due to higher priceLBMP after scheduled load reductionSource: Neenan Associates, NYISO PRL Evaluation
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Energy Analysis Department
Costs and Benefits of NYISO Costs and Benefits of NYISO Programs: Summer 2001 ResultsPrograms: Summer 2001 Results
• Estimated market benefits to all consumers are large relative to incentive costs
• Need standardized methods to evaluate market benefits
Source: Neenan Associates, NYISO PRL Evaluation, 2001
DADRP (million $)
EDRP (million $)
Costs Incentives $0.2 $4 Benefits Reliability - $23 Collateral $0.7 – 1.5 $1-13 Total $0.7 – 1.5 $24-36
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Energy Analysis Department
Characteristics of Innovative LSE PRL Characteristics of Innovative LSE PRL ProgramsPrograms• Substantial customer response at high
offer prices
• Multiple program options & features offered under a single “brand”
• LSE/customer share benefits (often not transparent to customer)
• Lots of customer care & education
• Use of customer-specific baselines
• Variety of forward contracting options
• Motivated or “incented” LSEs
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Energy Analysis Department
Portland General Electric’s Portland General Electric’s Demand Buy Back ProgramDemand Buy Back Program• Successful Demand Bidding Program with
three variants: day-ahead, week-ahead, and term events (i.e., demand buy-back)
• Eligible to customers with >250 kW demand and interval meters
• Participation in 2001: 26 customers, 230 MW potential load reduction
- Prior to FERC price caps: 122 events (July 2000 – May 2001), 162 MW average load reduction
- After FERC price caps: No more day ahead bidding; 75 MW through term events procured prior to caps
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Energy Analysis Department
Portland General Electric’s Portland General Electric’s Demand Buy Back Program (cont.)Demand Buy Back Program (cont.)• High level of demand response to market
opportunities- 230 MW (>50% of participants’ summer peak
demand) reduced at $300/MWh incentive
- Minimum incentive level for customer response was ~ $70/MWh
• Worked with each customer to identify load reduction goal and specific load reduction strategies
- E.g., cross-referenced maintenance schedules with facility meter data to determine MW reduction for specific processes, machinery
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Energy Analysis Department
Cinergy’s PowerShare Pricing Cinergy’s PowerShare Pricing ProgramProgram• Broad Menu of DR offerings under 1 Umbrella
- CallOption (three strike prices, two payment plans, four options to reduce Summer usage)
- QuoteOption (day-of program; no risk; all year)
• Utility Motivation & Role- Financial hedge against wholesale price volatility &
physical hedge against supply uncertainty
- Advisor for every customer
- Programs require significant upfront investment in E-commerce
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Energy Analysis Department
Cinergy’sCinergy’s Power Share Pricing Power Share Pricing Program (cont.)Program (cont.)• High Market Penetration:
- over 90% of large C/I loads (>500 kW) enrolled in 2000
- ~300 small and medium customers enrolled in 2001
• Market response- Large C/I Load: ~2500 MW
- Year 2000: ~440-600 MW of potential curtailable load with high prices (but mild summer; no operations)
- Year 1999: 200 MW of actual load reductions with prices as high as $850/MWh
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Energy Analysis Department
Market Activity of PRL Programs: Market Activity of PRL Programs: Summer 2001Summer 2001
0
10
20
30
ISO
-NE
LR
P –
Cla
ss 2
NY
ISO
DA
DR
PP
JM IS
O L
RP
– E
cono
mic
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&E
LR
P –
Opt
ion
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omIn
ion
Virg
inia
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s D
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ays
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rtic
ipan
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urta
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s Almost DailyAlmost Daily
NE/NY/Mid-Atlantic West Midwest
• Areas with most active PRL Programs: Pac NW,NY
• Market activity is relatively low with notable exceptions
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Energy Analysis Department
Actual Performance of PRL Programs: Actual Performance of PRL Programs: Summer 2001Summer 2001
0
100
200
300
400
500IS
O-N
ELR
P –
Cla
ss 2
NYI
SO
DA
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P
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ISO
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cono
mic
AE
SN
ewE
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y
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irgin
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LCP
Pac
ifiC
orp
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E
MW
Subscribed LoadActual Average Curtailed Load
• Several programs successfully enrolled ~300-400 MW
• Most PRL programs achieved modest actual reductions (Average = 19 MW)
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Energy Analysis Department
Eligibility and Potential Use of Backup Eligibility and Potential Use of Backup Generators (BUGs) in PRL ProgramsGenerators (BUGs) in PRL Programs
0
100
200
300
400
500
600
700N
YIS
OD
AD
RP
PJM
ISO
LR
P–
Eco
nom
ic
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&E
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Opt
ion
1 BP
A
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orp
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ergy
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PA
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ewE
nerg
y
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Sie
rraP
acifi
c P
ower
Dom
Inio
nV
irgin
ia E
LCP
Subs
crib
ed L
oad
(MW
) Non BUGBUG BUGs are 12% of
subscribed load
• Diesel-fired BUGs precluded or limited in some PRL programs/areas
• In “emergency” DR programs, BUGs account for 31% of subscribed load (not shown)
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Energy Analysis Department
Types of Wholesale Market PRL Types of Wholesale Market PRL ProgramsPrograms• Program Types:
(1) Day Ahead Price-Capped Load Bidding
(2) Load Reduction Bidding as Generation
(3) Transitional Load Reduction Pricing
(4) Voluntary Response to Market Price
• Discuss merits relative to criteria and goals
• Program Types are not mutually exclusive; can be complementary
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Energy Analysis Department
Day Ahead Price-Capped Load Day Ahead Price-Capped Load Bidding (#1)Bidding (#1)• A basic structural feature likely to be included
in SMD for day-ahead energy market (DAM)
• LSEs bid price points at which specific MW would be reduced – i.e., they bid a “demand curve”
• “No program” or “base case” approach
• Pros: fully integrated into DAM; no additional ISO uplift charges; no need for customer baseline load (CBL) estimate
• Cons: small DR market impact; participation limited to LSEs
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Energy Analysis Department
Load Reduction Bidding as Load Reduction Bidding as Generation (#2)Generation (#2)• Separate load reduction “product” that can
compete with generation in the day ahead energy market – e.g., NYISO DADRP
- Potential to fully incorporate load reduction bids into ISO scheduling and settlement processes
- Payments and penalties based on difference between CBL and metered load
• Pros: potential for significant DR impact; can be fully integrated into wholesale market; non-LSEs or customers can participate directly
• Cons: increased ISO uplift; additional admin. & transaction costs; CBL
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Energy Analysis Department
Transitional Load Reduction Pricing Transitional Load Reduction Pricing (#3)(#3)• Incentives decoupled from wholesale market• Provides opportunity for simpler program
structure and more predictable incentives• Can be achieved through any number of
specific program designs - e.g., load bids with price floors, call-option programs with reservation payments, etc.
• Pros: potential for significant DR impact from risk averse customers
• Cons: less direct impact on market than Options 1 and 2; additional uplift charges; seen as “preferential” to loads
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Energy Analysis Department
Voluntary Response to Market Price Voluntary Response to Market Price (#4)(#4)• Customers are paid the real time market
clearing price for voluntary curtailments- Based on ISO-NE Price Response Program- Customers must be able to respond without knowing
where the price will settle - No penalties- Load reductions not integrated into ISO scheduling
• Pros: few risks to customers; may provide potential for additional load reductions to DAM
• Cons: less direct impact on market; no price certainty for customers; difficult to predict response
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Energy Analysis Department
Comparing Alternatives: Factors and Comparing Alternatives: Factors and Criteria to Consider Criteria to Consider
PCLB(#1)
LRB(#2)
TLRP(#3)
VRMP(4)
DR Customer Response& Market Potential
Low Med/High High Low/Med
Opportunities for NewEntrants (CSP, RES)
No Yes Maybe Yes
Degree of integration intoISO scheduling andSettlement
High High Low Low
Impact on Uplift charges No Yes Yes Yes
CBL & ISO risk Low/None Medium High Varies
ISO Implementationfeasibility & incrementalcost
Easy (None) Mostwork(Yes)
Somework(Yes)
Easy
Program complexity –participants and ISO
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Energy Analysis Department
Key Policy QuestionsKey Policy Questions
• What market mechanisms are needed or desired by end users and other market participants in the PRL area?
• Should PRL programs be administered and supported by ISOs or only at the state PUC/retail level?
• Under what conditions are ISO-supported PRL programs appropriate – e.g., are PRL programs necessary if RTP was widespread?
• Relative magnitude of demand response resources (DRR) needed to ensure efficient wholesale markets?
- Will PCLB provide sufficient DRR resources or will other types of PRL programs be necessary?
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Energy Analysis Department
Key Policy Questions (cont)Key Policy Questions (cont)
• How do you pay for the enabling DR technology infrastructure necessary to capture consumer market benefits of PRL?
• Is the provision of demand response resources an attractive business opportunity for load aggregators?
- Is it a viable “stand-alone” business”?- Are there disincentives that limit interest of
potential load aggregators?
• What types of DRR should be eligible to participate in PRL programs
- Role of and/or limits on use of diesel-fired BUGs
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Energy Analysis Department
Program Design IssuesProgram Design Issues
(1) ISO/End User relationship and eligible entities
(2) Financial Incentives for PRL Programs
(3) Methods for estimating Customer Baseline Loads (CBL)
(4) Relationship between Emergency DR Programs and PRL Programs